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The cryptocurrencies are faster and cheaper narrative has fizzled out as banks have embraced digital payments in recent years, improving customer experience and usability. Sure, buying a beer with a QR-code may give you a warm and fuzzy feeling, but it isn’t the problem Bitcoin solves. It is much more than that.

Banks Go Digital

An all-too-common narrative a few years back was that Bitcoin (and other cryptocurrencies) would outcompete the likes of Visa and Mastercard with speed and cheaper transactions.

“Won’t somebody think of the merchants” was an often-repeated argument in 2014-215 because credit card companies typically charge around 3 percent service fee to process payments.

Fast forward a few years and merchants haven’t budged. Nor are they jumping on payment-focused coins either like Litecoin, Bitcoin Cash, Dash etc. So why didn’t they stick it to Visa and switch to ‘crypto’?

Digital fiat payments have actually become not only more ubiquitous but also much easier and cheaper. Though the latter is partially due to costs being offset by selling customer info to advertisers (which is a topic for another article).

Banks have indeed upped their game as far as user-friendliness goes with mobile apps, contactless payments, in-app integration, you name it. In fact, it’s never been easier to part ways with your money than it is today.

My Bank Card Beats Your Favorite Coin

My card, given to me by my bank, is tied to an app on my phone so I can check my balance and track all my balance and transaction history. I was impressed when BTC wallets did this six years ago. But banks have caught up fast and are beating cryptocurrencies in this arena.

The card/app work seamlessly together enabling contactless payments in the store, on public transport, and pretty much anywhere Visa/Mastercard are accepted, which is literally everywhere.

Sure, discussing Bitcoin is fun and all. But sometimes I just want a quick coffee without proselytizing Bitcoin to a barista who obviously doesn’t care about censorship-resistance and decentralized consensus protocols.

I should also mention that my bank has excellent customer support. It knows who I am and will block anyone else from using my account with the press of a button on my smartphone. My bank will refund me any money lost due to fraud – which is very reassuring unlike that uneasy feeling of possibly sending BTC to the wrong address by mistake.

What’s more, I can send money instantly to my friends for absolutely zero fees. And why wouldn’t it be zero? My bank is using a good old database after all – not your blockchain that takes minutes to confirm.

In other words, big blocks, small blocks, medium-sized blocks – none of this can compete when it comes to the speed and efficiency of a centralized database for payments.

My bank app even has a QR-code option for in-person payments if I’m feeling extra Bitcoin-ish.

The Problem That Bitcoin Solves

Bitcoin, however, wasn’t meant to compete with Visa or Paypal. Digital payments were already gaining traction when Bitcoin spawned from the 2008 financial crisis.

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model.

– Satoshi Nakamoto, Bitcoin Whitepaper

Bitcoin was instead designed as an alternative to the central banking system that has historically abused the public’s trust. One hyperinflationary episode is all it takes and the money becomes worth less than the paper it’s printed on.

Bitcoin’s monetary policy, on the other hand, is completely transparent, its supply and inflation rate is known, and it’s the hardest form of money to ever exist. Yes, even more than gold because mathematical scarcity beats perceived scarcity.

These attributes make it a money technology that has never existed before – and more importantly, removes the need to trust any intermediary.

In an article titled The Problem That Bitcoin solves, economist and The Bitcoin Standard author, Saifedean Ammous, explains:

[Paul Krugman] seems, mistakenly, to assume bitcoin is competing with consumer payment networks like Visa or PayPal….that is not what bitcoin is best suited for. Rather, bitcoin is an international settlement network, one that competes with the central bank settlement systems that are the foundation upon which networks like Visa or PayPal depend.

Therefore, the ‘payments for coffee on the blockchain’ narrative is dying because paying for stuff and accepting digital payments today isn’t a problem for people.

However, the public is also slowly realizing why Bitcoin isn’t going away. Particularly as publications like Time magazine release articles titled ‘Why Bitcoin Matters for Freedom’ and places like Venezuela are demonstrating how Bitcoin is literally saving lives.

That’s not to say that payments aren’t important. This and other use-cases will be built as ‘apps’ harnessing the trustless Bitcoin blockchain (e.g. Lightning Network). But they’re secondary to what’s really at stake here in an increasingly authoritarian and cashless fiat system: financial sovereignty.

Do you agree that Bitcoin’s primary role is to preserve financial sovereignty? Share your thoughts below!

Bitcoin has been quietly preparing for over a decade for the next market storm as a non-political alternative to the money printing pyramid.

Bitcoin Separates Money and State

Bitcoin was forged by the last great financial crisis of 2008 and designed to thrive in financial turmoil.

“Bitcoin adoption has always been driven by bank failures, bailouts, bail-ins, and political unrest,” said Max Keiser in an interview with Bitcoinist earlier this month.

It’s certainly no coincidence that Satoshi Nakamoto left a message in the first ever mined Bitcoin block —known as the genesis block. It famously contains the dated title of an FT article:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.

The anonymous creator hints that Bitcoin is a non-political alternative to the existing financial system. The Bitcoin whitepaper could, in fact, be interpreted by some as a declaration of the separation of money and state.

Bitcoin was an inevitability — a solution to downfalls of the trust-based monetary system — in which central banks and governments have historically abused that trust at the expense of the public.

For almost fifty years now, the de facto global currency has essentially been running on ‘full faith and credit’ only. The problem is that when this faith is tested by the markets (i.e. reality), credit-fuelled bubbles are exposed. When they go pop, liquidity dries up and cash once again becomes king.

Bitcoin: Trust Buster

So it’s no surprise that cash injections — euphemistically known as QE (Quantative Easing) — have become the preferred drug prescribed by central banks to fuel the longest bull market in history.

At the same time, the demand for the US dollar hasn’t waned but actually risen. This phenomenon may have impacted the price of bitcoin 00 this year, according to Keiser.

“The problem Bitcoin has had recently is its competitor, the US Dollar, has been rising,” he explains.

When the dollar rolls over and starts dropping, Bitcoin will hit new ATH.

Meanwhile, critics say it’s too volatile to be a safe haven alternative. Its price has admittedly dropped by 85 percent from its all-time high in 2017. But proponents, like Max Keiser and many others, argue that short-term price fluctuations do not matter if the legacy fiat monetary system is inherently flawed.

They also note that savvy investors are realizing the long-term value proposition of holding the world’s most politically-neutral, hard form of money.

Simply put, trusting no one pays off for those who wait.

Bitcoin Transfers Value From the Sodler to the Hodler

Saifedean Ammous, economist and author of the Bitcoin Standard, states that Bitcoin’s attributes, particularly immutability and neutrality, make it attractive to investors with a long-time preference.

Bitcoin has already gone through 9 years of growth out in the wilds of the internet, mostly without a central planner in charge of it after its creator disappeared. It grew because it offered utility to enough users and developers to keep maintaining it.

It has weathered attacks and hacks and ‘community conflict’ and plenty of powerful interests and questionable characters trying to bend it to their will. After all of this, Bitcoin can indeed claim to be immutable. Once it became clear Bitcoin was successful at doing this, then anyone who was interested in an immutable digital hard money could use it.”

Coinbase President Asiff Hirji, whose San Francisco-based exchange launched a custodial platform for institutional investors earlier this year, also sees Bitcoin and cryptocurrencies rewarding the patient in the future.

According to Hirji, none of Coinbase’s investors speculated on BTC price when they valued the exchange at $8 billion earlier this year. They weren’t betting on what the price will be “today, tomorrow or even a year from now,” he said

“If that’s your time horizon, as an institutional investor, you shouldn’t be touching this,” adds Hirji.

Fragile Fiat

From a security standpoint, centralized money systems are also honeypots. Centralized infrastructure is prone to hacks and shut down compared to a much more robust decentralized network like Bitcoin, which has been operating 24/7 with 99.8 percent uptime.

What’s more, third-parties aren’t just security holes. They are also structurally political. A duopoly such as Visa and Mastercard, for example, can (and do) restrict access for their own reasons, and even have the power to push other companies to toe the line.

The next global financial crisis is baked into the fiat cake. It’s a matter of not if, but when.

Will Bitcoin be ready? Only time will tell. But with warning signs already surfacing such as global social unrest and the markets tanking, the test may come sooner rather than later.

An ‘unorthodox prediction’ of mining difficulty increases puts the bitcoin price somewhere around $17,000 in 2020 — due to the possible power law relationship between the two.

Bitcoin price and difficulty ‘power law relationship’

Twitter user @100trillionUSD is back again with another intriguing chart — this time plotting the relationship between BTC price 00 and expected bitcoin mining difficulty in the coming years.

The previous graph visualized the relationship between the bitcoin mining reward halving and its impact on price over time, plotting the months before the halving event took place. This time the focus was on mining difficulty and price, since manyanalysts consider it to be inextricably linked to network hash rate.

“Price follows hashrate,” said Max Keiser earlier this year. Adding that it’s been his “mantra” since bitcoin was at $3.

Mining is undoubtedly profitable when the hash rate is rising. It also means miners are confident in the future of Bitcoin if they are adding hardware to scale up their operations. However, a high hash rate also causes the Bitcoin mining difficulty to increase. This makes the mining process more resource-intensive as more hash power is needed to achieve the same results as at lower difficulty levels.

If the hash rate is too high relative to the price at which miners can sell their mined bitcoin (as we’ve seen this year), the most unprofitable miners will likely drop out. They may sell their equipment or simply turn off their rigs until the price recovers or it becomes easier to mine as difficulty adjusts.

“Based on the poll results on bitcoin difficulty and the possible power law relationship between bitcoin price and difficulty (see formula below), an unorthodox prediction of the 2020 bitcoin price would be: $17,317,” explains 100trillionUSD.

Overall, 85 percent of respondents believe the difficulty will increase 10-100 times in the next two years. Meanwhile, only 10 percent think this is the beginning of the end for Bitcoin mining frequently referred to as the ‘death spiral’ (more about this later).

The biggest share of respondents (59 percent) expects the difficulty to rise 10x between today and the end of 2020. A smaller group (27 percent), however, believe the increase could be as high as 100X, which would translate into a price above $28,000.

Granted, the poll sample size was rather small with just over 250 votes. Nevertheless, mining difficulty is an important factor to consider for not only predicting BTC price but also evaluating the state of the network as a whole.

Difficulty Drops But No ‘Death Spiral’

Bitcoinist recently reported that the Bitcoin network mining difficulty just had another downward adjustment to lower price. The biggest in seven years, in fact, amid a year-long bear market that saw an 85 percent drop in market capitalization from its all-time high in late 2017.

But contrary to many ‘experts’ equating a break in the trend to the start of a mining ‘death spiral,’ the difficulty adjustment is an important counterbalance for the Bitcoin network. In other words, the adjusting difficulty (every 2016 blocks) relative to hash rate is a feature that enables the Bitcoin network to find the equilibrium for mining profitability.

What’s more, this is similar to what central banks do by raising and lowering interest rates with changing market conditions. However, in Bitcoin’s case, the adjustment is entirely baked into the code and thus, entirely predictable.

Is mining difficulty a good metric to consider when predicting price? Share your thoughts below!

Bitcoinist spoke with Bitcoin Cash advocate and owner of Bitcoin.com, Roger Ver, about the BCH ‘hash war,’ his controversial website branding of Bitcoin (BTC) as ‘Bitcoin Core,’ and why he believes Bitcoin developers are “economically illiterate.”

Bitcoinist: Bitcoin Cash just went thru a ‘hash war’ with Craig Wright/Ayre splitting off to a new chain called Bitcoin Cash SV. Can you share your reflections on the recent hard fork?

Roger Ver: Craig and I don’t have any disagreement. It seems strange that the media is trying to frame it that way.

What developments does Bitcoin Cash have in the pipeline now? What are you most excited about?

I’m most excited about oracle.bitcoin.com that will be launching in full soon. It will result in censorship resistant exchanges, sports betting and much more. I’m also very excited about our Coin Shuffle privacy tool coming to the Bitcoin.com wallet very soon.

Is Bitcoin Cash open to a Lightning Network type of scaling solution, sidechains etc. in the future?

I’ve never been opposed to any of those things. In fact, I’ve provided more funding for both Lightning and Side Chains than just about anyone else. I’m only opposed to the insane BTC block space production quota still being advocated for by a bunch of economically ignorant software engineers who need to pick up an economics book.

Given your commerce adoption focus, how interested are merchants in accepting BCH right now? Why? How many currently accept BCH worldwide?

Obviously, they are very interested as shown by the fact that Bitpay has provided full support for BCH on their platform. More than 100,000 websites are currently accepting BCH, and likely more physical shops are accepting BCH than BTC now.

Many Bitcoin proponents argue that Satoshi’s anonymity and disappearance give it an advantage over other coins that have known founders or de facto community leaders. Do you agree? In this sense, is Bitcoin Cash at a disadvantage since many would consider Roger Ver a leader of sorts given your popularity?

I reject the premise. I didn’t start BCH, and I’m not the leader. I’m just one of many users although I may be louder than most.

Bitcoin Core believes that Bitcoin's goal is to become digital gold.

Bitcoin Cash believes that Bitcoin's goal is to become a global currency.

You recently stated that “Bitcoin Core believes that Bitcoin’s goal is to become digital gold. Bitcoin Cash believes that Bitcoin’s goal is to become a global currency.“ But Satoshi wrote that Bitcoin is “more typical of a precious metal.” Why do you prioritize adoption in commerce over SoV? Doesn’t this also run counter to the evolution of money stages as a collectible->store of value->currency->unit of account?

I reject the evolution of money cycle that you have laid out. Money is simply the most commonly accepted barter good. The dollar is the world’s most popular store of value because you can spend it anywhere. If Bitcoin had been allowed to continue to be spendable anywhere, it could have become the world’s most popular store of value.

Instead, the economically ignorant BTC camp have intentionally undermined BTC’s usefulness in commerce and unwittingly undermined its usefulness as a store of value.

I laid it out in detail very clearly in this video that has aged very well.

Your website Bitcoin dot com states: “Buy Bitcoin Cash (BCH) and Bitcoin Core (BTC) with a credit card.” Critics say you are intentionally mislabeling BTC as Bitcoin Core, the name of the Bitcoin software client, to get new users to buy BCH. There have also been reports of people wanting to buy BTC but mistakenly buying BCH instead. How do you respond?

BCH has more Bitcoin-ness about it than BTC, so it doesn’t make sense to call BTC Bitcoin. The website is labeled very clearly, and we have never had a single report from an actual customer making a mistake.

BTC fees have been at the lowest in years this year. Moreover, on October 16, a Bitcoin user moved 29,999 BTC worth $194 million with a $0.1 fee. Why do you state, based on your recent tweets, that Bitcoin (BTC) has “full blocks” and “high fees”?

By intentional design of the “Core Developers”, they want Bitcoin to have high fees and full blocks. If the fees are currently low, then they are failing at what they have set out to accomplish. Either way, they are incompetent.

BCH price is currently at record-lows in USD and BTC terms and down over 96% from all-time highs. What’s the reason? Hash war? Lack of adoption? Overall bearish crypto market? A combination of factors?

Obviously, it is a combination of factors. The market is made up of millions of participants with their own needs, desires, and goals.

Do you hold more BCH than BTC?

Of course. BTC’s future is dim with the misguided economic code being promoted.

Facebook, Amazon, Apple, Netflix, and Google stocks have together shed over $1 trillion in market capitalization from their all-time highs, marking an even bigger loss in dollar value than all cryptocurrencies combined in 2018.

FAANGs Lose Bite

Bitcoin and cryptocurrencies, in particular, are not the only bubble in town.

Stocks of tech stalwarts like Google, Amazon, and Facebook, collectively knowns as FAANG, have lost over $1 trillion USD in market capitalization from their all-time highs.

Comparatively, despite a nightmare year for cryptocurrencies, the total cryptocurrency market cap is down roughly $700 billion from its $830 billion historic high in January 2017.

Among the FAANGS, Netflix (NFLX) was the worst performer, down -34.8% for the year (as of December 13th), followed closely by Facebook at -33.7%, according to data from Investopedia.

Apple Inc. (AAPL) didn’t fare much better amid disappointing iPhone sales, down -26.8% stock from its record price – and almost -14% in the past month alone.

Amazon.com Inc. (AMZN) is also dropped by a considerable -19.1% with Google-parent company Alphabet Inc. (GOOGL), right behind with a -16.9% drop.

The runup to record high valuations for FAANG shares was an impressive bull period, which appears to now have peaked in July 2018. Interestingly, this month was also the last time Bitcoin (BTC) saw prices above $8,000.

But while the ‘Bitcoin is dead’ narrative appears to be greatly exaggerated, according to a recent study from the University of Cambridge, the cryptocurrency ‘bubble’ is admittedly still relatively more severe than FAANGs’ with an 85% drop.

Everything’s Bubbling

The S&P 500 and the Nasdaq 100, for example, have fallen by a lower -9.9% and -12.1%, respectively, from their own highs compared to the FAANGs. In fact, the recent stock rout has been led by the once-red-hot FAANG as tech-oriented ETFs saw “massive outflows” in November, reports Bloomberg.

“The conditions that have allowed these kinds of high-growth stocks to outperform have changed, if not reversed,” says David Lafferty, chief market strategist at Natixis Advisors. “I just don’t see much upside.”

Similar conditions may have also allowed for this exuberance to spillover to the nascent cryptocurrency industry earlier this year. Both Wall Street and retail investors began buying into the high-risk, high-reward casino world of crypto and novel ICOs pushing the price to record highs by the end of 2017.

At the time, newly launched Bitcoin futures marked Bitcoin’s entry into mainstream finance, boosting Bitcoin price to new heights. Today, BTC price 00 is down roughly 85% from its all-time high of almost $20,000.

Bitcoin Adoption ‘Driven By Bank Failures’

Unfortunately for both stocks and cryptocurrency, Lafferty doesn’t see much hope for the near term as the central bank policy has shaken many investors.

“The Fed’s tightening is getting to where it’s starting to hurt,” he says. “GDP should decelerate in 2019, which will lead to a natural decline in earnings growth. What that means for multiples and investor sentiment is up in the air.”

Elsewhere, protests across France and slower economic growth globally as a whole could be a sign of a looming financial crisis, which in 2008 birthed Bitcoin as a decentralized and apolitical alternative to the existing financial system.

In other words, don’t be surprised to see a divergence between Bitcoin and stock market performance in the future.

Former Wall Street investor and market analyst, Max Keiser, recently told Bitcoinist that Bitcoin was, in fact, designed to thrive in times of economic turmoil. He explained:

Bitcoin adoption has always been driven by bank failures, bailouts, bail-ins, and political unrest. The problem Bitcoin has had recently is its competitor, the US Dollar, has been rising.

Ten years after its birth, it will be interesting to see if Bitcoin – which isn’t a stock or a company share but a digital protocol for transferring value – can eventually decouple from traditional markets and provide a haven during the next bust cycle.

Fundstrat Global Advisors Head of Research, Tom Lee, meanwhile recently called BTC undervalued, given its fundamentals are strong as ever.

“Bitcoin’s fair value, given the number of active wallet addresses, usage per account and factors influencing supply, is between $13,800 and $14,800,” said Lee.

In the macroeconomic climate, Lee holds that treasury sales of initial coin offerings (ICOs) are the reasons for the lower price.

Therefore, the market correction could actually prove to be healthy for Bitcoin, the most secure blockchain in the world, as unprofitable businesses and low-quality projects go belly up, leaving only the cream of the crop for the next bull-run.

Can Bitcoin thrive in the next financial crisis? Will it outperform FAANG stocks in the near future? Share your thoughts below!